IOSR Journal of Business and Management (IOSR-JBM)

e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 19, Issue 7. Ver. VI. (July 2017), PP 31-34
www.iosrjournals.org

A Study on Prospects and Challenges in Implementation of Goods

and Services Tax (GST) in India
*
Ch.Venugopal Reddy
MBA(Fin.)SET,M.com Faculty in UCE&T, MGU, Nalgonda.
Corresponding Author: Ch.Venugopal Reddy

Abstract: GST which is known as Goods and Services tax is considered to be one of the most crucial reforms in
India. It is indirect tax structure designed to support and enhance the economic growth of a country. More than
150 countries have implemented GST so far. It is a comprehensive tax system that will bring all indirect taxes of
states and central governments and unified economy into a seamless national market. This paper presents an
overview of GST Concept, explains its prospects and challenges faced by India in execution.
Keywords: Indirect taxes, Unified economy, Goods and Services tax (GST).
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Date of Submission: 15-07-2017 Date of acceptance: 27-07-2017
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I. Introduction
The GST is a vast concept that simplifies the macro tax structure by supporting and enhancing the
economic growth of a country.GST is a comprehensive tax levy on manufacturing, sale and consumption of
goods and services at national level. The goods and services tax bill initiates a value added tax to be
implemented on a national level in india.GST will be an indirect tax at all the stages of production to bring about
uniformity in the system. On bringing GST into practice, there would be amalgamation of central and state taxes
into a single tax payment. It would also enhance the position of India in both domestic as well as international
markets. The proposed GST is likely to change the whole scenario of current indirect tax system. It is
considered to be a biggest tax reform since1947.Experts says that GST will help the economy to grow in more
efficient manner by improving the tax collection as it will disrupt all the tax barriers between states and integrate
country via single tax rate.

II. Objectives Of The Study

1. To study the inexplicit opinions among the Manufactures, traders and society about the Goods and Services
Tax (GST).
2. To study about the Challenges of Introduction of Goods and Service Tax (GST in India).
3. To Study the Prospects in Implementation of Goods and services Tax (GST) in India
4. To Cognize the concept of GST

III. Review Of Literature

Ehtisham Ahmed and Satya Poddar(2009)1studied,”Goods and Services Tax Reforms and
intergovernmental consideration in india” and found that GST introduction will provide simplier and transparent
tax system with increase in output and productivity of economy in india but the benefits of GST are critically
dependent on rational design of GST. Dr. R.Vasanthagopal(2011)2Studied, “GST in india: A Big leap in the
indirect taxation system”and concluded that switching to seamless GST from current complicated indirect tax
system in india will be a positive step in booming Indian economy.Sucess of GST will lead to its acceptance by
more than 130 countries in world and a new preferred form of indirect tax system in asia also. Agogo
Mawuli(May 2014)3Studied, “Goods And Service Tax-An Appraisal” and found that GST is not good for low
income countries and does not provide broad based growth to poor countries.If still these countries want to
implement GST then the rate of GST should be less than 10% for growth. Nitin Kumar(2014)4Studied, “Goods
And Service Tax- A Way Forward” and concluded that implementation of GST In India help in removing
economic distortion by current indirect tax system and expected to encourage unbiased tax structure which is
indifferent to geographical locations. Pinki, Supriya kamma and Richa verma(July2014) 5studied, “Goods And
Service Tax-Panacea for indirect tax system in india”and cocluded that the new NDA Government in India is
positive towards implementation of GST and it is beneficial for central of government, state government and as
well as for consumers in long run if its implementation is backed by strong IT infrastucture.

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 A Study on Prospects and Challenges in Implementation of Goods and Services Tax (GST) in India

IV. Research Methodology

The Researchers used an exploratory research technique based on past literature from respective
journals, annual reports, newspapers and magazines covering wide collection of academic literature on Goods
and Service Tax. According to the objectives of the study, the research design is of descriptive in nature.
Available secondary data was extensively used for the study.
V. Results And Discussion
Table 1: Taxes At The Centre And State Level Are Being Subsumed Into GST.
S.No At The Centre State Level
1 Central Excise Duty, a. Subsuming of State Value Added Tax/Sales Tax,
2 Additional Excise Duty, b. Entertainment Tax (other than the tax levied by the local
bodies), Central Sales
Tax (levied by the Centre and collected by the States),
3 Service Tax, c. Octroi and Entry tax,
4 Additional Customs Duty commonly known as d. Purchase Tax,
Countervailing Duty, and
5 Special Additional Duty of Customs. e. Luxury tax, and

The above table shows list of taxes centre and state level are being subsumed into GST Keeping in mind the
federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre
and States will simultaneously levy GST across the value chain. Tax will be levied on every supply of goods and services.
Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods
and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging
the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the
SGST on output. No cross utilization of credit would be permitted.
Table 2: List of Asian Countries Implementing Vat/Gst
No. Country GDP Per Capita (World Year of Implementation Current Rate (%)
Bank, 2011, USD)
1 Bangladesh 743 1991 15.0
2 china 5,445 1994 17.0
3 India 1,509 2005 12.5
4 Iran NA 2008 5.0
5 Japan 45,903 1989 5.0
6 Jordan 4,666 2001 16.0
7 Kazakhstan 11,357 1991 12.0
8 Kyrgyzstan 1,124 1999 20.0
9 Lebanon 9,413 2002 10.0
10 Mongolia 3,129 1998 10.0
11 Nepal 619 1997 13.0
12 Pakistan 1,189 1990 16.0
13 Papua New Guinea 1,845 2004 10.0
14 South Korea 22,424 1977 10.0
15 Sri Lanka 2,835 2002 12.0
16 Taiwan NA 1986 5.0
17 Tajikistan 935 2007 20.0
18 Turkmenistan 5,497 1993 15.0
19 Uzbekistan 1,546 1992 20.0
Courtesy by GST SEVA.com:
The above table shows List of Asian Countries Implementing VAT/GST Worldwide in almost 160 countries there
is GST/VAT, Under the GST scheme, no distinction is made between goods and services for levying of tax. This means that
goods and services attract the same rate of tax. But at present India is planning tax rate at 5%, 12% and 18% which will bring
8 Lakh Crore revenue to the government. Under the GST scheme, a person who was liable to pay tax on output, whether for
provision of service or sale of goods, is entitled to get input tax credit (ITC) on the tax paid on its inputs. Thus, it would
definitely a positive reform for the Indirect tax system in India.
Table 3: States in India Who Cofirm Goods and Service Tax (GST) Constitution Amendment Bill
No State Passed on
1 Assam 12th August, 2016
th
2 Bihar 16 August, 2016
3 Jharkhand 17th August, 2016
4 Himachal Pradesh 22nd August, 2016
5 Chattisgarh 22nd August, 2016
6 Gujarat 23rd August, 2016
7 Madhya Pradesh 24th August, 2016
8 Delhi 24th August, 2016
9 Nagaland 26th August, 2016
10 Maharashtra 29th August, 2016
11 Haryana 29th August, 2016
12 Sikkim 30th August, 2016
13 Telangana 30th August, 2016
14 Mizoram 30th August, 2016
15 Goa 31st August, 2016
16 Odisha 1st September, 2016
17 puducherry 2nd September, 2016

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 A Study on Prospects and Challenges in Implementation of Goods and Services Tax (GST) in India
18 Rajasthan 2nd September, 2016
19 Andhra Pradesh 8th September, 2016
20 Arunachal Pradesh 8th September, 2016
21 Maghalaya 9th September, 2016
22 Punjab 12th September, 2016
23 Tripura 26th September, 2016

The above table shows List states in India who confirm of implementing goods and service tax (GST)
Constitution amendment bill in their respective states by doing so it will bring harmonization of taxation system
in India.

Challenges in Implementing GST:

1. Note ban has huge impact on the Goods and Services Tax (GST) a serious doubt on implementing GST by the
central government`s targeted deadline of April 1, 2017..
2. The impact of the November 8 demonetization of highvalue currency on their respective economies to
underline that it is not the appropriate time to implement. That could have a unstable effect on the economy.
3. The Centre continues to be un compromising on the issue of jurisdiction over assesses, the states maintain.
4. Political reasons are determining the fate of GST, which is not the correct thing, because ideally GST is an
economic, and tax reform and economic and tax reforms should not be dictated by political.
5. Manufactures, traders and society are eagerly waiting not only for the date of introduction of GST but also for
the rate application to the products and services.
6. GST will also have impact on cash flow and working capital. Cash flow and working capital of business
organizations which maintain high inventory of goods in different states will be adversely affected as they will
have to pay GST at full rate on stock transfer from one state to another. Currently CST/VAT is payable on sale
and not stock transfers.
7. Implementation of GST in Unorganized sectors i.e, unregistered firm will be unfavorable to government.

Prospects of Implementing GST:

The introduction of Goods and Service Tax (GST) in India is now on the horizon. The Constitution
Amendment Bill to replace existing multiple indirect taxes by uniform GST across India.
1. The current indirect tax structure is major impediment in India’s economic growth and competitiveness. Tax
barriers in the form of CST, entry tax and restricted input tax credit have fragmented the Indian market.
Cascading effects of taxes on cost make indigenous manufacture less attractive. Complex multiple taxes
increase cost of compliance. In this scenario, the introduction of GST is considered.
2. Removal of tax barriers on introduction of uniform GST across the country with seamless credit will make
India a common market leading to economy of scale in production and efficiency in supply chain. It will expand
trade and commerce. GST will have favorable impact on organized logistic industry and modernized
warehousing.
3. Electronic processing of tax returns, refunds and tax payments through ‘GSTNET’ without human
intervention, will reduce corruption and tax evasion. Built-in check on business transactions through seamless
credit and return processing will reduce scope for black money generation leading to productive use of capital.
4. Major beneficiary of GST would be sectors like FMCG, Pharma, Consumer Durables and Automobiles and
warehousing and logistic industry.
5. High inflationary impact would be on telecom, banking and financial services, air and road transport,
construction and development of real estate.

VI. Conclusion
It can be concluded from the above discussion that GST will bring One Nation and One Tax market.
Provide relief to producers and consumers by providing wide and comprehensive coverage of input tax credit
set-off, service tax set off and subsuming the several taxes. Efficient formulation of GST will lead to resource
and revenue gain for both Centre and States majorly through widening of tax base and improvement in tax
compliance. It can be further concluded that GST have a positive impact on various sectors and industry.
Although implementation of GST requires concentrated efforts of all stake holders namely, Central and State
Government, trade and industry. Electronic processing of tax returns, refunds and tax payments through
‘GSTNET’ without human intervention, will reduce corruption and tax evasion. Built-in check on business
transactions through seamless credit and return processing will reduce scope for black money generation leading
to productive use of capital, Therefore It is necessary on the part of the government to educate, conduct proper
training, continuous seminars and workshop on GST is need of the hour. Thus, necessary steps should be taken.

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 A Study on Prospects and Challenges in Implementation of Goods and Services Tax (GST) in India

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BIOGRAPHY
CH.VenuGopal Reddy: B.Com (Hons.), MBA (Finance), M.Com, currently working as a
faculty in university college of Engg. & Technology, Mahatma Gandhi University, Nalgonda,
Telangana, Areas of interest: Accounting and Finance.

IOSR Journal of Business and Management (IOSR-JBM) is UGC approved Journal with Sl.
No. 4481, Journal no. 46879.

Ch.Venugopal Reddy. "A Study on Prospects and Challenges in Implementation of Goods and
Services Tax (GST) in India ." IOSR Journal of Business and Management (IOSR-JBM) 19.7
(2017): 31-34.

DOI: 10.9790/487X-1907063134 www.iosrjournals.org 34 | Page